Unparalleled Potential
Bitcoin benefits from the performance of a “risk-on” asset for when times are good, and the capital markets are expanding. But, concurrently, it offers the security of its “risk-off” properties for when times get tough, and people rush to protect their capital.
To explain this further, Bitcoin is “currently” seen as a risk-on asset for most people. An asset one invests in when the economy is thriving. However, risk-on assets tend to be classified this way as we have counterparty exposure. There is the potential for loss during times of economic stress. Therefore, we would argue that Bitcoin, when self-custodied, removes counterparty exposure, giving it risk-off characteristics (An asset that performs well when times are tough and people are looking to reduce portfolio risk). In saying this, in times of stress, when people are looking for assets to preserve wealth and provide security, Bitcoin is in a prime position to do well.
However, despite Bitcoin’s risk-off characteristics, it benefits from the risk-on capital flows during prosperous times. As Bitcoin is an emergent technology, we have not yet seen global adoption, and it is through adoption, that these emergent assets tend to outperform. When we factor in the industries that can benefit from Bitcoin (i.e. the global monetary system, the financial sector, the insurance industry, e-commerce and micropayments, to name a few), it becomes clear that Bitcoin is unparalleled in upside potential.
- Looking Glass Education 2021
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